Nissan to Focus on New Small Cars, HQ Move

But Nissan North America Inc. will be doing just that next summer.

Nissan Motor Co. Ltd. and Renault SA CEO Carlos Ghosn announced in early November the auto maker would hitch up the moving van and say so long to trendy-but-awfully-expensive SoCal and howdy to Nashville to take advantage of a friendlier, less costly business environment.

Ghosn says he also wants headquarters to be nearer Nissan's southern U.S. manufacturing operations in Smyrna, TN. Employees will work in temporary facilities until a new headquarters building is complete in 2008 in the Nashville suburb of Franklin.

It is just one of the big changes on tap for the North American arm of the Japanese auto maker.

While 2005 has been slow for Nissan, with no vehicle launches besides the new Infiniti M in the first quarter, 2006 is shaping up to be busy.

After re-doing its entire light truck lineup in recent years, Nissan now is shifting its focus to cars.

Next year, Nissan will debut the Mexico-built Versa subcompact, sold in Japan as the Tiida, which will have two body styles, a hatchback and sedan. The next-generation Sentra and Altima also are due, as is Nissan's first-ever hybrid-electric vehicle, the Altima Hybrid. In the spring, its Infiniti luxury brand will make news by launching the next-generation of the vehicle that led its renaissance, the G35 sedan and coupe.

Until October, 2005 looked like a great year for the auto maker, and the Nissan and Infiniti brands were on fire in the U.S., up 7.2% and 16.3%, respectively, January-September, according to Ward's data.

Nissan's Jed Connelly

“We didn't expect as much year-over-year gain as we did get,” Jed Connelly, senior vice president-sales and marketing, NNA, says of the auto maker's performance in the first nine months.

“We were planning high single digits and (were) running about 15%-16% (all brands combined). I think that some of the nice surprises include the continuing strength of Altima, as it nears the end of its lifecycle, and the continuing strength of Murano, two very, very important vehicles for the brand that just continue to click away.”

In April, Nissan announced it sold 1 million units in the U.S. for fiscal 2004. And, in late September, CEO Ghosn announced Nissan had achieved the final goal of its Nissan 180 business plan: selling 1 million more vehicles globally during the period from Oct. 1, 2004, to Sept. 30, 2005, than it did during the same period in 2001. North America accounted for 437,000 of the 1.073 million units.

Then, high gas prices conspired to shut down industry sales and Nissan's light-truck lineup took a beating, as l did the aging Sentra and Altima cars. NNA's October sales, uncharacteristically, fell 13.3% vs. year-ago. Competitors Toyota Motor Sales U.S.A. Inc. and American Honda Motor Co. Inc. saw increases of 5.2% and 4.2%, respectively, in October, according to Ward's data.

Still, NNA's 2005 sales likely will top 1 million for the first time in a calendar year, standing at 908,448 through October.

Connelly says the October results caused Nissan to dial back production of its light trucks, from now until the end of the fiscal year in March, in favor of cars and cross/utility vehicles.

“We actually are in the process of adjusting our inventories and adjusting our production and taking some of the fullsize vehicles down a little bit. And we're taking Altima, Sentra, and Murano, for example, up a little bit,” Connelly says.

Although gas prices in most parts of the country fell in November, Nissan is betting buyers still will be clamoring for cars rather than trucks next year.

Nissan Versa is expected to start at about $12,000.

No sales projections for the Versa have been released, but Connelly says the vehicle's “very roomy interior may differentiate it from some of its competitors,” which include the upcoming Honda Fit and Toyota Yaris.

“It has a tremendous value story,” he says of the Versa, which is expected to start at about $12,000. “The interior fit-and-finish, the interior roominess at that price point – I think it's a phenomenal story.”

The Versa boasts 120 hp from its 1.8L 4-cyl. . Three transmissions will be offered: a 6-speed manual, 4-speed automatic or a continuously variable transmission, the latter being one way HEV-shy Nissan plans to improve fuel economy.

The Versa hatchback is due next summer, while the sedan won't be seen until late December 2006/early 2007.

The Sentra replacement, which was delayed one year due to negative consumer focus group feedback, finally is set to debut next summer, and the new midsize Altima will launch shortly thereafter.

Both are critical to Nissan's continued success in the U.S. market.

“We're hopeful there'll be some nominal increase (in Sentra sales),” says Connelly of the next-generation model. “There's been a bit of resurgence in Sentra at the end of its lifecycle because of fuel economy and some of the other issues.”

However, he admits a lot of Sentra's success this year, up 14.6% through October, is due to hefty incentives to move the 6-year-old current-generation model.

Nissan, while playing the incentive game more than Honda or Toyota, still has incentives about 60% of the industry average, he says.

On the retail side, Connelly says Nissan is in a good position with its U.S. dealer count, both for Nissan and Infiniti brands.

This past summer NNA launched the Infiniti Retail Environment Design Initiative (IREDI for short), which aims to redesign aging Infiniti dealerships in the U.S. to boost sales. The first batch of remodeled stores are expected to be completed by spring.

“The response is great, the dealers love the program,” Connelly says of IREDI. “We have three dealers who are going to do ground-up prototypes probably in the next six to 12 months, and the dealers are excited because, very much like the Nissan program, the dealer advisory board was involved and I think it's always much more successful on both sides if you have dealer involvement.”

There now are about 178 Infiniti dealers in the U.S. All are selling the brand exclusively.

Connelly expects Infiniti dealer growth to be “very, very modest. We're only going to where markets are expanding and emerging,” he says, adding “a couple dealers” will be added next year.

A similar program to redo Nissan stores, NREDI, is at the halfway point, says Connelly, with a quarter of Nissan's U.S. dealers completing remodeling.

Some 65% of Nissan's dealerships are exclusive, up from 50% when the program launched three years ago.

“I think our exclusive count now is very much on par with Toyota and Honda, and we were quite far behind three years ago,” he says. “I think a lot of that has to do with the strength of the product and the expansion of the product lineup – and not coincidentally I think – the (NREDI) program as well.”

Like Infiniti, Connelly expects little if any growth in Nissan's dealer count.

“There's always a little bit of plus-and-minus, but basically our dealer count has been stable and it should remain stable,” he says.

As for the U.S. auto industry overall, Connelly echoes his boss Carlos Ghosn, who believes next year will be rough for the U.S. auto industry. “I think it's well served to be cautious,” he says.

[email protected]